Workers' Compensation - Assignment Example

Workers Compensation What is workers compensation? Workers compensation is a form of benefit for workers that is found in both the USA and Australia.It takes many forms, acting as each of the following types of insurance: Disability insurance – a weekly or monthly payment for employees who are injured in the course of employment. In the USA this constitutes around two thirds of the employees usual wages, but this depends on several factors, such as the contract held by the employee and length of time working for the company Health insurance – either reimbursement of medical expenses, or payment of such expenses Life insurance – where benefits are paid to relatives of employees who have died through their employment However it also has the following additional functions: Provides compensation for financial, or monetary, loss through employment or work activities. This can be either past or present loss, so it is possible to recoup financial losses some time after they have occurred. Provides general damages for pain and suffering, which is in addition to the medical expenses and disability sides of the benefits described above. How did the workers compensation scheme arise? Workers compensation arises in a society which has become industrialised, in which trade unions have fought for the rights of workers to ensure that they are treated fairly, making sure that they are not treated as expendable by companies for which they work. Workers compensation ensures that they receive fair compensation if they are injured or die as a result of working, but it also ensures that companies value their workers, as it is obviously not in their interests to allow workers to become injured at work, since this will cost the company substantial amounts of money. Workers compensation laws originally came into practice in the USA from 1911, and were adopted by most states by 19201. There have been several revisions to them since then, but it is still the same underlying principles which underpin the compensation laws today (Fishback 2001)23. Prior to the Workers compensation scheme, any person injured at work could still claim compensation if they proved that the employer had been negligent. This was hard to do, however, as cases were often hard to prove, and there were several clauses which an employer could use to evade responsibility, such as if the employer could prove that the employee was aware of the dangers of the job before they accepted. At this time, the employer-employee relationship was also still regarded very much as a master-servant relationship, which also made it difficult for compensation of any form to be claimed by an employee. How does the Workers compensation scheme work? Each company holds a schedule which has been designed to show the different levels of compensation that an employee will benefit from for a given type of injury. For example, the scheme may state that if an employee is to amputate a finger through work related activities, they are entitled to up to $5000 compensation for medical expenses, up to $5000 for pain and suffering, and disability benefit until the person is able to return to work.4 The same kind of scheme would also outline the amounts of compensation that the person would be entitles to if the injury was so severe as to prevent them from ever working again, and would also place a value on the benefits to be received by relatives in the case of death. What are the advantages of the Workers compensation scheme? Most of the benefits to the workers compensation scheme are obvious from the information above. It gives a fair system to ensure that all workers are entitled to compensation from employers, and sets out the amounts that they are entitled to, which ensures that the compensation received is not subjective to the employer. It takes away the onus on the employee to prove the employer as being negligible and ensures that the process is the same for all employees, so there is appropriate guidance available for the employee to ensure that their claim for compensation is as quick and easy as possible, which is especially important during a time when they are probably already undergoing some form of pain and suffering. Not only is the process quicker, but the fact that the employee no longer has to actively pursue the case through the courts ensures that the litigation costs for both the employee and the employer are reduced. The scheme is also an advantage to the employer5 in that they are aware of the exact costs that they would be liable for if such an accident were to occur, and this enables the employer to take out adequate insurance, based on a risk assessment of the job involved. In fact, in many states there are large penalties for companies who do not have adequate insurance cover, as it is mandatory by law.6 Are there any disadvantages to the Workers compensation scheme? The answer to this question, as is usually the case with any form of legislation, is yes, there are disadvantages. The most obvious disadvantage in the system is that the employee is only entitled to around two thirds of their usual income. This can make a lot of difference, prticularly in houselholds with only one income earner. This is an inevitable outcome to such a bargain having been made with employers when the original schemes were introduced however. If the benefits received by the employee were any more then this would put great financial presure on companies, especially the smaller ones, as if they had people absent from work through sickness and injury they would probably also have to pay another individual to do the employees job until they returned. It would therefore probably encourage many companies to find other reasons to terminate the employees contract in order to save themselves this expense. One such example of an employer in which this could cause many problems would be in hospitals. Every year there are a large number of healthcare professionals, particularly nurses, who injure their backs at work and have to spend time off from work. If the compensation were to be the full wage, there is not really any way in which the hospital ward could survive with less staff, so they would be paying two lots of wages until the nurse returned to work. As this would create huge strain on staffing budgets, the hospital would be under immense pressure to either terminate the contract with as many sick members of staff as possible, or to simply use less staff, which would then in turn put more pressure on the other staff7. This is only one exmample, but we can see from this why the scheme was originally negotiated as partial wages as disability benefit as opposed to employees recein¡ing full payment. Another of these is the way in which the ability of an injured or disabled person is assessed as being able to work again. The amount of compensation to a person is obviously usually much lower if the person is assessed as being able to work in some partial capacity, but it does not take into account how difficult actually finding this type of work can be. For example, a person who loses an eye through work would obviously always be eligible for compensation for medical expenses and for pain and suffering that the injury causes. However when assessing the lost income, the scheme would conssider that the loss of an eye would still allow the person to work in a partial capacity, either at the existing employment depending on the job which was held, or with an alternative employer. However in this does not take into account the difficulty in actually obtaining employment in this partial capacity. For example, the current employer may state that they no longer have a job that is suitable for a partially sighted person, and let the employee go. The employee may then have to spend considerable time and money looking for a job that would be suitable. Even if they were to find something, there is no guarantee that it is going to be as financially rewarding as their previous career, and in many cases may be nothing related to their chosen career in life. There may also be loopholes in the system which could be taken advantage of by an employer. For example, if the employer can show that the employee has been negligible in some way they may be able to contest the right to compensation. If this goes to court, even if it is eventully rules that the employer pay compensation to the employee, it could take a long time for this to happen, during which time the employee is left in a very undesirable situation of having very little or no income, at a time when expenditure is probably even greater than usual due to medical expenses, travelling to and from clinics and other related expenses. These disadvantages may be one of the reasons why the scheme appears to be utilised by only around half of those injured at work. In studies that have been carried out in the USA, it has been shown that women, and those in the employment of small firms are most likely to apply for compensation, but that only up to around 45% of workers who contract injury or illness through work claim Workers compensation (Biddle 1998).8 Summary Employees in most industrial nations are protected by some form of workers compensation, and in the USA this consists of partial payment of wages while not able to work, benefits for medical expenses, along with several other forms of compensation for injury or illness as a result of work. The system has been developed as a result of negotiation with trade unions, and before coming into effect the onus was on the employee to actively pursue the employer for negilgence, which was very difficult to prove. However, along with the many advantages of the scheme, there are also some distinct disadvantages, which may be responsible for the current underuse in the USA. Reading List Biddle, J., Roberts, K., Rosenman, K. and Welch, E.M. “What percentage of workers with work-related illness receive workers compensation benefits?” Journal of Occupational and Environmental Medicine 40.4 (1998) : 325-331 Fishback, Price. “Workers Compensation”. EH Net Encyclopedia, edited by Robert Whaples. August 15, 2001. Fishback, Price and Kantor, Shawn. A Prelude to the Welfare State: The Origins of Workers Compensation. Chicago: University of Chicago Press, 2000. Hood, J.B., Hardy, B.A. and Lewis, H.S. Workers compensation and employee protection laws in a nutshell, 4th ed. St. Paul: West Publishing, 1999 Read More